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Jim Cook

 

RUNAWAY SOCIAL SYMPATHY

Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

 
Best of Bill Buckler
June 16, 2010
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Omnipotent Government:

Yes, this is the title of a book by Ludwig von Mises published in 1944. In the context of the numbers above, the subtitle he chose for his book is telling. It was - The Rise of the Total State and Total War.

The end of that rise should have come 20 years ago with the collapse of the last representative of the “omnipotent governments” of the twentieth century - the Soviet Union and its satellite states. That collapse is said to have come about as a result of a huge increase in “defense spending” by the Reagan administration in the 1980s, an increase which the USSR could not match without imploding.

In the entire course of U.S. history up until 1980, the government ran up about $U.S. 930 Billion in funded debt. In the decade between 1981 and the fall of the “East Bloc” in 1991, the U.S. ran up another $U.S. 2.4 TRILLION in funded debt. Yes, that was a huge acceleration. But look at the two decades SINCE 1990 and the end of the threat of the USSR. The U.S. has run up almost another $U.S. 10 TRILLION in funded debt. In the process, the government of the US has become the most “omnipotent” on earth.

So much for the “peace dividend” or for claims that the U.S. was protecting the “freedom” of the world.

If the GFC is to have any benefits in future (and we think it will have many), one of the biggest will be the explosion of the notion of “omnipotent government”. The expansion of government and its power has been an article of “faith” for MUCH too long. That’s why the potential collapse will be so big.

Views On “Big Government”:

On June 2, CBS MarketWatch published an article claiming that Americans’ views on “big government” may shape the outcome of the mid-term elections this November. It was claimed that the argument over how big a role the federal government should play in the lives of Americans was “as vigorous as ever”.

If this argument is a feature of mainstream America at all, it has only resurfaced very recently. We saw no sign of a debate over the size of government in the campaign leading to the election of President Obama - which was less than two years ago. But according to the “polls”, things are now changing. More Americans now worry more about too much government regulation than too little. And three out often Americans view the federal government as a major threat to their personal freedom. THREE OUT OF TEN!! Clearly, the “debate” has a LONG way to go.

It has taken a “sovereign debt crisis” and the rising unease inside the US that their government cannot continue to borrow and spend while remaining unaffected by this crisis to bring even the glimmerings of a debate over the size of government to life. In Europe, nations are taking direct action over the size of their governments. Yes, in the case of the “Club Med” European nations, this action has been forced upon them. But the slashing of deficits is not confined to the “Club Med” nations - it is Europe wide.

The U.S. government still wants to wait until its “stimulus” reawakens the private sector of the economy and increased tax revenue allows them to go on spending without blowing out their deficit at the rate they have been doing it for the past decade. That is simply NOT going to happen - not until the government itself starts lifting its dead weight off the back of the productive sector. Europe has made a start. The U.S. is NOT following. The longer this parting of the ways continues, the greater the danger for the U.S.

The Best Laid Plans ...:

In a desperate attempt to buy time for its borrowing and spending and stimulus to “work”, the US
government and in particular the US establishment has set up the very situation they had been trying desperately to avoid since the start of the GFC. They have raised the global spectre of a “sovereign debt crisis”. They have raised it in Europe to delay the time at which it would be focused on themselves.

The U.S. establishment hopes that they can get the rest of the world to “go along” as it has been “going along” for many decades now. They did get the European Union, in extremis, to agree on the bailout package which (it is hoped) will allow Greece and its fellow “Club Med” nations to borrow at rates they can afford. But that’s all they got, and now their plan to buy time is rebounding on its planners.

There are two aspects of the Europeans’ plan to start actually cutting the size of their governments which are most inimical to the US powers that be. The first is that the spending cuts announced all over Europe since the G-20 meeting graphically acknowledge that “stimulus” is impotent to revive REAL economic growth. The second is the area that Europe has singled out for the biggest cuts - defense spending.

As The Privateer has pointed out and analysed for many years, the foundation of the global strength of the US is the fact that they do not have a “defense” policy. Instead, their armed forces are posted all over the world. In terms of armed outposts on a global basis, the U.S. is by far the biggest empire in history.

Clearly, the maintenance of this global U.S. armed might is completely untenable economically. Just as clearly, the U.S. could massively reduce the size of its budget deficit merely by reducing the amount it spends on “defense” to a level commensurate with other nations. The problem for the U.S. establishment is that such an action would massively decrease their global power and with that, the global attractiveness of their currency and the debt paper denominated in their currency. The Europeans are well aware of this situation. They have announced these comparatively HUGE cuts in their own military spending to put pressure on the U.S. to follow suit. The U.S. establishment has sowed the wind. Here comes the whirlwind.

INSIDE THE UNITED STATES

RIDICULOUS ASSERTIONS - AND - FISCAL LIP SERVICE

In response to the May US jobs data, President Obama wasted no time. “This is a sign that our economy is getting stronger by the day”, he crowed. Sure enough, the US Labor department had proudlyannounced that US “payrolls” added 431,000 jobs in May and that the unemployment rate dropped to 9.7percent from the 9.9 percent recorded in April.

There was some other data in the jobs figures, but neither the Labor Department nor Mr Obama stressed it in their remarks. For one thing, the jobs created in the private sector fell about 81 percent from the previous month. For another, almost all the new “jobs” created were for people temporarily hired to conduct the census. For yet another, the number of new jobs created in the private sector was less than a quarter of what had been forecast by US economists. This is a perfect picture of a productive economy being swallowed up by the borrowing and spending “needs” of government.

The “Recovery Indicator”:

The problem is that the only item that preserves any lingering hope of “recovery” in the minds of the American people is their stock markets. As reported in our previous issue, by May 20, all three U.S. stock market indices had recorded official “corrections”, falling by more than 10 percent from previous highs, most of those highs having been set less than a month earlier. Still, by the end of May, the Dow had only recorded two closes below the 10000 level in 2010, the first on February 8, the second on May 26.

That has changed thus far in June with four straight Dow closes (on June 4,7,8 and 9) below the 10000 level. There is no decisive break below the 10000 level yet. The Dow regained that level on June 10 on what was specifically analysed in the mainstream press as a renewed willingness to “take risks”. And how did the mainstream press know that this willingness had resurfaced? Simple, Gold, the U.S. Dollar, and Treasury paper all fell on the day, the latter two quite substantially.

The true state of the U.S. economy (and the global one) can be gauged by the fact that investment in anything EXCEPT the global reserve currency, debt paper denominated in the global reserve currency or the only alternative to any debt-based paper asset is seen as being “risky”. On June 8, the same day that Gold hit a new all time high close of $U.S. 1245.60, the trade-weighted U.S. Dollar index (USDX) closed at its highest level since March 10, 2009. That was the day after U.S. stock markets hit their GFC low.

The Five Percent Solution:

In his latest bid to give lip service to his government’s plans to start tackling their deficit - at some point in the future - President Obama has “demanded” that what he calls the “non security” branches of the U.S. government specify how they would reduce their budgets by five percent. Does he want them to do that now? No. This demand was included in the White House budget guidance for the fiscal year 2012. Fiscal year 2012 does not START until October 1, 2011 - well over a year from now. And, of course, 2012 is a presidential election year.

Right now, the US government is frantically trying to figure out a way to spend more while conveying the impression that they are “serious” about the deficit. This is becoming very difficult for them. Congress left town for their Memorial Day break without finalising legislation which would extend unemployment benefits for Americans whose eligibility ran out - on June 1. These benefits were not summarily cut off, Congress resumed on June 7 to continue to address the problem. The problem is that HALF of all unemployed Americans have been without a job for more than six months, the highest total since records began in 1948. The longer they stay unemployed, the higher the spending needed to maintain their “benefits” and the higher the deficit. Remember, the November elections are only five months away.


 

 

Ó 2009 – The Privateer

http://www.the-privateer.com

capt@the-privateer.com

(reproduced with permission)

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